How to Buy U.S. Treasury Bonds: TreasuryDirect, Brokers, and Taxes

You can buy U.S. Treasury bonds two ways: directly from the federal government through a free account at TreasuryDirect.gov, or through a brokerage account that gives you access to new-issue auctions and the secondary market. Both routes accept purchases starting at $100, and the securities are backed by the full faith and credit of the United States. TreasuryDirect is the cheapest path and lets you buy at auction with no middleman. A broker costs a little more at some firms but lets you sell before maturity without extra steps.

The Two Ways to Buy, Compared

TreasuryDirect is the government’s own platform. You open an account, link a bank, and place non-competitive bids at scheduled auctions. The securities sit electronically in your TreasuryDirect account, and interest and maturity proceeds flow to your linked bank account or to a zero-percent Certificate of Indebtedness inside TreasuryDirect.

A brokerage account is the alternative. Many major firms let you buy new-issue Treasuries at auction alongside stocks and funds in the same account, and they also give you access to the secondary market, where previously issued Treasuries trade every business day. Brokers identify each bond by its CUSIP number. Some charge commissions or markups, though many large firms have dropped commissions on new-issue Treasuries. The practical advantage of the brokerage route is liquidity: you can sell a Treasury on the open market before it matures. Selling early from TreasuryDirect requires first transferring the security to the commercial book-entry system, which is a separate process.

Opening a TreasuryDirect Account

To register as an individual, you certify that you are at least 18, that you are a U.S. citizen or resident, that you have a valid Social Security Number, that you have a U.S. address of record, and that you have an account at a U.S. financial institution that accepts ACH debits and credits.¹ Federal employees can open accounts wherever they are stationed. Entities such as trusts, estates, corporations, LLCs, and partnerships can also hold accounts, using an Employer Identification Number in place of an SSN.²

Have these ready before you start the online application:

Your Social Security Number (or EIN for an entity).
The routing number and account number for a checking or savings account that accepts ACH transactions.¹
An email address for notifications, authorization codes, and confirmations.
A U.S. mailing address.

You will pick an account type, create a password, and set up security questions. The linked bank account funds purchases and receives interest and maturity proceeds. Enter the routing and account numbers carefully. A typo can delay activation or block your first purchase.

Placing an Order Through TreasuryDirect

Once your account is active, log in and choose “BuyDirect.” The system walks you through picking the security type, entering a dollar amount, and selecting a scheduled auction date. The Treasury publishes upcoming auctions on a schedule, typically announced several days ahead.³ You can make the purchase a one-time buy or set up recurring purchases over several months. A confirmation screen shows the details before you finalize.

Nearly all individual investors use non-competitive bidding. You agree in advance to accept whatever yield the auction produces, and you are guaranteed to receive the amount you asked for. The non-competitive cap is $10 million per auction, which is not a real constraint for most buyers, and it does not apply when you are reinvesting proceeds from a maturing security.⁴ Competitive bidding, where you specify the yield you want, is used mainly by institutional buyers; if the yield you specify sits above the auction’s clearing rate, you get nothing.

After the auction closes, the security appears in your account and your bank account is debited for the purchase amount.

What You Can Buy

All marketable Treasury securities carry a $100 minimum, with additional amounts in multiples of $100.⁵ The categories differ by term and how interest works:

Treasury Bills, with terms from 4 weeks to 52 weeks, sold at a discount and paying face value at maturity rather than periodic interest.⁶
Treasury Notes, issued in 2, 3, 5, 7, and 10-year terms, paying interest every six months.⁶
Treasury Bonds, in 20 and 30-year terms, paying semiannual interest.⁶
Treasury Inflation-Protected Securities (TIPS), in 5, 10, and 30-year terms. Principal adjusts with the Consumer Price Index, so interest payments rise and fall with inflation.
Floating Rate Notes, two-year securities whose interest resets based on the most recent 13-week T-Bill auction.⁷

Series I and Series EE savings bonds are a separate product line sold only through TreasuryDirect, not through brokers. They cannot be resold on a secondary market and are capped at $10,000 per person per calendar year for each series in electronic form.⁸

Buying Through a Broker

To buy through a broker, open a standard taxable brokerage account or a retirement account at a registered firm, then look in the fixed-income section for Treasury products. The broker executes trades on your behalf and holds the securities in a custodial account, so your Treasuries appear on the same statements as your other holdings. Search by CUSIP if you know the specific security you want, or browse by maturity and yield.

Two things to check before you place an order. First, whether the broker charges a commission or markup, especially on secondary-market trades, since pricing varies by firm. Second, whether the broker offers new-issue auction participation or only secondary-market purchases. If you plan to hold to maturity and want the cleanest pricing, new-issue auctions from any source produce the same yield the Treasury sets. If you want the ability to sell before maturity, the brokerage route is simpler than TreasuryDirect.

What Happens If You Sell Before Maturity

Hold a Treasury to maturity and you get your full principal back. That guarantee does not extend to the price you can get if you sell early. When market interest rates rise, the price of an existing fixed-rate bond falls; when rates fall, prices rise.⁹

The effect is much larger on long bonds. A 30-year Treasury will swing in price far more than a 2-year note for the same shift in rates. Selling a long-term bond during a period of rising rates can produce a meaningful loss on the sale price even though you have been collecting interest throughout. The government guarantees the coupon payments and the return of principal at maturity. It does not guarantee the resale price.⁹

How the Interest Is Taxed

Interest on all Treasury securities is subject to federal income tax but exempt from state and local income taxes. The exemption is set by federal statute and covers bills, notes, bonds, TIPS, FRNs, and savings bonds.¹⁰ There are two narrow exceptions: states can still apply nondiscriminatory franchise taxes on corporations, and estate or inheritance taxes still apply.

If you live in a high-tax state, the state exemption can push the after-tax yield on a Treasury above that of a corporate bond or CD with a higher nominal rate. Your 1099-INT from TreasuryDirect or your broker reports the interest, and you carry it to your federal return. Tax software generally identifies U.S. government interest and applies the state exemption on its own.

Maturity and Reinvestment

When a marketable Treasury matures, the proceeds go where you designated: either your linked bank account or a zero-percent Certificate of Indebtedness inside TreasuryDirect that holds cash until you use it.¹¹ You can also schedule automatic reinvestment into a new security of the same type and term, either when you first buy or any time before maturity.

The number of times you can chain reinvestments depends on the security: up to 25 times for a 4-week bill, 7 times for a 13-week bill, 3 times for a 26-week bill, and once for other security types.¹² If no matching replacement is available on the maturity date, or if the maturing proceeds fall short of the new purchase price and the Treasury cannot debit the difference from your bank, the reinvestment is canceled and the money is returned to you.

1
TreasuryDirect. User Guide Sections 001 Through 010
2
eCFR. 31 CFR Part 363 – Regulations Governing Securities Held in TreasuryDirect
3
TreasuryDirect. When Auctions Happen (Schedules)
4
eCFR. 31 CFR 356.12 – What Are the Different Types of Bids
5
TreasuryDirect. FAQs About Treasury Marketable Securities
6
TreasuryDirect. About Treasury Marketable Securities
7
TreasuryDirect. Floating Rate Notes (FRNs)
8
TreasuryDirect. How Much Can I Spend/Own?
9
SEC. Interest Rate Risk – When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall
10
Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation
11
TreasuryDirect. TreasuryDirect FAQ
12
eCFR. 31 CFR 363.205 – How Do I Reinvest the Proceeds of a Maturing Security